The latest focus on X-Energy (XE) stems from an $11 million economic development grant awarded to its TRISO-X subsidiary to expand nuclear fuel fabrication and research facilities in Oak Ridge, Tennessee.

For context, X-Energy’s share price return has been weak in recent months, with the stock down 8.17% over 1 day, 16.69% over 7 days, 36.06% over 30 days and 52.64% year to date at a latest share price of $13.83. This suggests momentum has been fading even as the TRISO-X grant puts a spotlight on its role in future nuclear fuel supply.

If this grant has you thinking more broadly about the future of nuclear and power systems, it could be a useful moment to see what else is on the radar via our 90 nuclear energy infrastructure stocks

Bulls argue that X-Energy’s grant backed fuel platform and annual revenue of $117.1 million justify a premium, while bears point to the $545.8 million net loss and sharp share price slide. Which case does the valuation actually support?

Preferred Price-to-Sales Multiple of 34x: Is It Justified?

With X-Energy trading at a last close of $13.83, the stock is described as expensive on a P/S basis compared with both its industry and peer group, even as attention builds around its TRISO-X grant and revenue profile.

The preferred multiple here is the price-to-sales ratio, which sits at 34x for X-Energy. P/S compares the company’s market value with its annual revenue and is often used for businesses that are still loss making, because earnings based measures like P/E are not meaningful when profits are negative.

For X-Energy, this high P/S multiple sits alongside annual revenue of $117.1 million and a reported net loss of $545.8 million. The market valuation of about $6.1b is being supported by expectations for future revenue rather than current profitability. Statements also indicate revenue is forecast to grow at 43.1% per year, but that the company is expected to remain unprofitable over the next three years, which puts additional focus on whether that revenue trajectory is enough to support such a high sales multiple.

The comparison to benchmarks is stark. X-Energy’s P/S ratio of 34x is described as expensive versus the US Electrical industry average of 2.6x and also expensive relative to a peer average of 5.1x. That suggests the market is pricing in far stronger growth or a more valuable product mix than the typical electrical equipment stock and its immediate peers, even though X-Energy is still recording large losses and has less than one year of cash runway.

Result: Price-to-sales of 34x (OVERVALUED)

However, X-Energy’s steep share price slide and limited cash runway mean any setback in revenue growth or reactor deployment timelines could quickly challenge the current premium narrative.

Another View: What Does the SWS DCF Model Say About X-Energy?

While the 34x P/S ratio paints X-Energy as expensive versus its industry, the SWS DCF model also points in the same direction, with an estimated future cash flow value of $12.22 versus the current $13.83 share price. That implies X-Energy is trading above this cash flow based estimate, so where does that leave the current premium?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out X-Energy for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 49 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With sentiment clearly split on X-Energy’s premium and its risks, it makes sense to move quickly and review the data directly, including the 2 key rewards and 3 important warning signs.

Looking for more investment ideas beyond X-Energy?

If X-Energy has caught your attention, do not stop there. Broadening your watchlist with other structured ideas can help you spot opportunities you might otherwise miss.

• Target reliable compounding potential by checking companies with strong cash generation and attractive valuations through the 49 high quality undervalued stocks.
• Strengthen your income stream by reviewing companies that appear in the 8 dividend fortresses and offer higher yields backed by solid fundamentals.
• Protect your downside by focusing on businesses that show resilient financial profiles and lower risk scores using the 82 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.